WEAKNESSES

High dependency on trade, financial services and the presence of multinationals

Over-valuation of Swiss franc

Uncertainty on migration policy and its impact on relations with the EU

Poor agricultural productivity

High price of property and household debt

Highly concentrated banking sector

RISK ASSESSMENT

Successful adaptation to the appreciation of franc

In 2017, the rate of growth could increase slightly but will remain moderate. Domestic demand will continue to make the biggest contribution and remain at the same level. Despite the negative impact of the reduction in net immigration, household consumption should pick up slightly with the upturn in employment and the return of wage rises. Companies will complete their efforts to restore their margins that suffered with the price cuts granted in order to mitigate the impact of the sudden appreciation of the franc in January 2015 associated with the abandoning of the ceiling rate by the Swiss National Bank (BNS). House building is expected to continue bolstered by low interest rates. In addition, company investments are likely to remain at the current level, now that the uncertainty concerning new immigration legislation seems cleared. Foreign workers accounted for 30.5% of the active population in the 2nd quarter of 2016. At the same time, cheap credit and falling prices of imported goods could encourage automation, limiting the need for highly paid labour. Public spending on the other hand could slow at the same time with the savings being introduced at both the federal and cantonal levels. The positive contribution from foreign trade is expected to increase slightly. Adaptations to the appreciation of the franc are well under way, thanks both to improved productivity and cuts in production costs. Sales of pharmaceutical products (30% of the total) will continue growing. Chemicals (9%) will perform satisfactorily. The situation for precision instruments (8%), in particular medical, agri-food, machines (11%), electrical equipment (6%), paper, clothing and textiles will improve. Watchmaking (11%) will continue to suffer as the Chinese economy cools. In terms of services, finance will gain from its excellent reputation, as will commodity trading. Tourism and transport will continue to suffer from a relative disaffection on the part of European visitors because of the unfavourable exchange rate, although the top-end will remain attractive for its US customers. In domestic terms, retail will again face competition from supermarkets located in the border areas. In this context, there could be a gradual increase in the number of insolvencies (Coface estimate: +3%). The claims rate will remain low.

Surplus in the external accounts and struggle against the rise of the franc

The country has a substantial current account surplus. It includes a surplus in the trade in goods (8.3% of GDP in 2015) and a surplus in services (2.6%), generated above all by financial services and licence and patent royalties, as well as significant transfers from workers abroad (4.6%, with 1% from foreign cross-border workers). And after deducting the trade in commodities (3.9%) and the foreign earnings of multinationals and wealthy non-residents domiciled in the country for tax reasons (estimated at 1.4%), the surplus is still 6.3%. Traditional exports have, on the whole, adapted fairly successfully to the sudden leap in the Swiss franc in January 2015 thanks to their strong non-price competitiveness linked with their sophistication, the reputation for quality and low labour factor costs (cf. pharmaceuticals: 4% of GDP but 0.8% of jobs). In addition, the accumulation of surpluses over the years has enabled the country to build up substantial assets abroad. With imported deflation, the upwards pressures on the franc and the low rate of growth, the central bank is expected to maintain its negative policy interest rate (-0.75% in November 2016). It will also continue its large-scale purchases of foreign assets for a total in excess of the gross domestic product. If it allowed the franc to rise further, the recovery would be chocked off.

Solid public accounts and continued links with EU

In accordance with the budget rule, there is a structural equilibrium in the public accounts. If there is a significant deterioration in the economic situation, the federal and cantonal authorities, by a simple vote of the representative bodies, have the ability to trigger a major recovery budget. The public debt is held equally by the Federation and by the Cantons and Communes. The cost of this is extremely low with zero rates on 10 year bonds and negative rates for shorter maturities. The National Council and the Council of States are dominated by right and centre-right parties at least until the next elections in 2019. Managing the immigration issue and relations with the EU remain two key areas of concern. A constitutional initiative intended to reintroduce the ceilings and annual quotas for foreigners over three years was narrowly approved in a referendum in February 2014. These provisions are contrary to the free movement of people as agreed between the Confederation and the EU, the abandoning of which would bring an end to all the bilateral sectorial agreements between the two partners.Parliament has favoured ties with the EU by adopting a law at the end of 2016, requiring employers, when the unemployment rate in the sector or region is above average, to offer their jobs to the local unemployed before turning abroad, under penalty of CHF 40,000. The European Commission will have to validate the text.

Last update : January 2017

Payments

Bills of exchange and cheques are not commonly used owing to prohibitive banking and tax charges; the stamp duty on bills of exchange is 0.75% of the principal amount, for domestic bills, and 1.5% for international bills.

Similarly, commercial operators are particularly demanding as regards the formal validity of cheques and bills of exchange as payment instruments.

Domestic and international payments are commonly made by bank transfer, especially via the SWIFT electronic network to which the major Swiss banks are connected and which provides speedy and efficient processing of payments at low cost.

Debt collection

The Swiss legal system presents technical specificities, as follows :

The existence of an administrative authority “Enforcement and Bankruptcy Office”(e.g. Office des poursuites et des faillites / Betreibungs und Konkursamt / Ufficio di esecuzione e fallimenti) in each canton, with several offices at local government level, which is responsible for executing court orders and whose functioning is regulated by federal law.

Interested parties may consult or obtain extracts of the Office’s records.

The issuance of a new unified civil procedure code, set up by a commission of experts, approved by the Federal Council and which became effective as of 1st January 2011.

The enactment of this code entails the repeal of the 26 cantonal procedure laws which were an obstacle to a safe and timely justice.

However a lawsuit requires the assistance of a lawyer familiar with the court organisation of the place where the case is instituted, as well as with the language to be used to conduct the litigation (French, German or Italian).

This Act states several sorts of procedures depending on the content or the monetary value of the dispute and stipulates that the parties must make an attempt at conciliation or submit to mediation, before requesting full trial.

The debt collection process commences with the issuing of final notice preferably by recorded delivery (thus making it possible to accrue past-due interest) asking the debtor to pay, within two weeks, the principal amount increased by past-due interest calculated – unless otherwise agreed by the parties – at the legal rate which is 5%.

In the absence of payment, the creditor will submit a duly completed and signed petition form (réquisition de poursuite) to the Enforcement and Bankruptcy Office which then serves the debtor with a final order to pay within twenty days starting from the date of the notification of the petition.

While very easy to use by creditors, that procedure nonetheless permits debtors to oppose the order within ten days of being served, without having to specify grounds.

In such case, the only alternative for creditors is to seek redress through the courts.

Conversely, where a seller holds unconditional proof of debt signed by the buyer (any original document in which the buyer recognises his debt, bill of exchange, cheque, etc.), he may request the temporary liftingof the debtor’s opposition (main levée de l’opposition) without having to appear before the court.

This is a simplified procedure, quick and relatively easy to obtain, in which the court’s decision is based upon the documents submitted by the seller.

Once this lifting order has been granted, the debtor has twenty days in which to refer the case before the judge to obtain the debt’s release (libération de dette) and, in turn, obtain an executory order.

That entails initiating a formal and now unified procedure – including a written phase and an oral phase with possible examination of witnesses during court hearings – lasting from one to three years according to the canton.

Legal costs vary widely depending on the rates charged by the various cantons.

Once the court hands down a final ruling, upon request of prosecution, the Enforcement and Bankruptcy Office delivers an execution order or a winding-up petition (commination de faillite).

This winding-up petition enables the creditor to send to court a request of bankruptcy. Upon receipt of this request, the court will fix a hearing by inviting both, creditor and debtor in written.

Without payment from debtor or withdrawal of the request on the part of the creditor who made the request, the court will declare the debtor company bankrupt.

Either a court of first instance or a district court hears legal procedures. Commercial courts, presided by a panel of professional and non-professional judges, exist in four Germanic cantons : Aargau,Berne, Saint-Gall, and Zürich.

Once an appeal has been lodged with the cantonal court, as a last resort for claims exceeding 30,000 Swiss francs (CHF), cases are heard by the main federal judicial institution, the Swiss Federal Court (Tribunal fédéral Suisse / Schweizerisches Bundesgericht / Tribunale federale svizzero) located inLausanne.

The other federal institutions are the Federal Criminal Court (Tribunal pénal fédéral / Bundesstrafgericht / Tribunale penale federale), located in Bellinzone, which was set up in April 2004, and the Federal Administrative Court (Tribunal administratif fédéral / Bundesverwaltungsgericht / Tribunale amministrativo federale), which began operations in January 2007, and has been established in Saint-Gall since July 2012.